Do gasoline prices asymmetrically affect US consumers' economic outlook?

- Let ICE (ICC) be consumers' assessment of future (current) economic conditions.
- ICE and ICC as well as ICE and the real price of gasoline (Pg) are cointegrated.
- ICE is positively related to ICC and negatively related to Pg in the long-run.
- ICE responds symmetrically to ICC movements but asymmetrically to Pg movements.
- That is, ICE remains unchanged when Pg declines but deteriorates when Pg rises.

Changes in gasoline prices can affect consumer sentiment which may then influence consumption. We utilize the Michigan Surveys of Consumers data on the Index of Current Economic Conditions (ICC) and the Index of Consumer Expectations (ICE) in order to explore the dynamic relationship between US consumers' economic outlook (ICE) and real gasoline prices (Pg) for 1993-2015. We find that ICE and ICC as well as ICE and Pg are cointegrated: ICE is positively related to ICC and negatively related to Pg in the long-run. In the short-run, ICE responds symmetrically to ICC movements but asymmetrically to Pg movements. That is, ICE remains unchanged when Pg declines but deteriorates when Pg rises.